ISLAMABAD: The Islamabad High Court (IHC) directed Customs Collectorate Islamabad to release the imported containers of used auto parts on payment of the applicable import duties, plus the redemption fine, plus penalty within the range that was prevalent and would have been charged before the Finance Act 2023.
A single bench of Justice Sardar Ejaz Ishaq Khan on Friday issued the directions while hearing the petitions of the Auto Parts Association through their counsel Adnan Haider Advocate.
The IHC bench also directed the respondents including Federation through Secretary Revenue Division, Chairman Federal Board of Revenue and Member Customs Policy to file para-wise comments by the next date of hearing. It added that if the matter is not settled earlier by virtue of the concise report that this Court expects to see by then.
‘Auto parts manufacturing industry going through toughest phase’
Justice Ishaq wrote in his written order, “The used auto parts imported by the petitioners shall be released on payment of the applicable import duties, plus the redemption fine, plus penalty within the range that was prevalent and would have been charged before the Finance Act 2023 was introduced, and in any case not more than Rs. 20,000.”
He added, “As for the balance amount of the penalty, the petitioners will submit security in the form of post-dated cheques with the Deputy Registrar of this Court before approaching the Customs for release of their imported goods in question.”
The IHC bench observed, “It appears to the Court that there is an apparent disconnect between the policy for raising revenues and the policy for the trade in used auto parts by the Government, which has resulted in this anomaly.
It would be of immense assistance to this Court if these petitions, along with a copy of this order, are considered by respondents 1 to 3, who are directed to actively engage in a consultative exercise with the Auto Parts Association, and such a meeting should also be participated in by the Secretaries of Commerce and Industries Division.
This consultative exercise is to be held before the next date of hearing, and respondent no.3 will appear in person on the next date of hearing to assist the Court along with a concise report following the outcome of the meetings aforesaid.“
In this matter, this petition along with 13 others was filed against the refusal of respondents no.5, 6 and 7 to release the used auto parts imported by the petitioners in all these petitions unless a penalty in the sum of the value of the imported goods were paid.
It stated that by the combined operation of (i) the Customs General Order 11 of 2006 dated 19.09.2006, (ii) SRO 499(I)/2009 dated 13.06.2009, and (iii) the Valuation Ruling 1714 of 2022 dated 21.12.2022, the petitioners have remained engaged in regular import of used auto parts from many years by now, which have routinely been released after payment of the applicable import duties, redemption fine of 20% of the Customs Value determined vide the Valuation Rulings from time to time, plus a token penalty of a few thousand rupees.
The petitioner’s counsel submitted that this was a consistent departmental practice, which becomes a binding source of interpretation of the relevant legal framework in view of the principles settled by the superior Courts, and also in view of the economic conditions in the country which necessitate import of used auto parts, which, if prohibited, would raise the price of repairs manifold for the transport sector of the economy.
He continued that the controversy owes its existence to an amendment introduced vide the Finance Act 2023 (that appears to be a rather myopic one for not being thought through all its implications), by which row no (9) of section 156(1) of the Customs Act was amended to add the words ‘not less than the value of the goods’ to the words ‘not exceeding twice the value of goods’.
As a consequence of this amendment, the erstwhile practice of imposing a token penalty was, in view of respondents no.4 to 6, no longer possible, and therefore they demanded the full penalty in the value of the imported goods, which makes the penalty prohibitive rendering the trade impossible to perform.
The counsel contended that the said amendment is being applied incorrectly, because the rationale and purpose was to curb smuggling and not to kill the trade of import and sale of used auto parts, which continues to be the case till today, because the Customs officials are ready to release the goods as long as the full penalty was paid.
He concedes that the prohibition under the Import Policy Order of 2016 against the import of used auto parts is there, but submits that the Customs law operates in its own sphere, where under items otherwise prohibited under the Import Policy are routinely allowed to be released (instead of confiscation) on payment of redemption fine and a token penalty.
He added further that, in any event, the amendment vide the Finance Act 2023 could not have retrospective effect, given that the letters of credit with the permission of the State Bank of Pakistan as well as the contracts for import were opened and entered into well before the Finance Act 2023.
Copyright Business Recorder, 2023
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